Slowdown in auto sector casts shadow over foundries
   Date :04-Sep-2019

Business Bureau :
The impact of ongoing slowdown in automotive sector seems to taking other associated sectors into its stride. While the number of passenger vehicle sales is falling down every passing month, the automobile manufacturing units are drastically squeezing the process of raw material procurement which is eventually posing a big threat to foundry industry among others. National Council Member of Institute of Indian Foundrymen (IIF) Sushil Sharma on Tuesday confirmed that the foundry industry is facing hardship. “It is mainly due to the current slowdown in auto sector as 40 per cent of the overall finished materiel of foundry is consumed by auto industry.
Right now, the automobile industry is on back foot and so are the others,” he said. Sharma said, majority of the foundries across the country are sailing in the same boat. “The market sentiments are not good which are bringing down the demand for passenger cars and commercial vehicles. This is being passed on to our sector,” he said adding that there are other factors, too, that are troubling the sector. “The policy makers are encouraging electrical vehicles as an option to the conventional vehicles. But this will further push the foundry industry into darkness,” he observed. Electrical vehicles need very less quantity of foundry products as compared to petrol or diesel run vehicles, he explained. Chairman of Nagpur Chapter of IIF R G Paranjpe also said that the industry is facing hardship.
“Tata Motors, Maruti and other prominent players in auto sector have cut down production and thus they are not generating demand for foundry industry,” he said. Apart from the slowdown, Paranjpe also highlighted some other challenges before the foundries, especially those based in and around Nagpur. “Most of our buyers (auto makers) are located in Pune, Mumbai, Hyderabad, Chennai and other far off places. Because of this, we have to pay increased cost on account of freight. In addition, we do not have sophisticated plants in this region which can do the machining of material coming out of the local foundries. Similarly, the high cost power is another major concern for all of us,” he said. It is important to note that the foundries need power for melting raw material. But cost of power in Maharashtra is on higher side when compared to adjoining states.
“Foundries find it very difficult to service in such environment. There should be no disparity in power tariff,” he felt. There are about 4,000 foundry units in the country out of which 15-20 units are based in Nagpur. About 40 per cent of the finished material of the foundries is consumed in auto industry followed by heavy engineering, real estate sectors which are also considered major buyers of foundry products. However, adding to the woes of foundries, real estate and heavy engineering sector are also not doing well in the current scenario. Some of the experts in the sector believe that the 28 per cent slab of Goods and Services Tax (GST) on automobiles, revised insurance charges, uncertainty over the pollution control norms for vehicles and cash crunch are others factors that are discouraging buyers of passenger cars.